Start-ups initially struggle to build a customer base. So, without a good marketing campaign, it’s simply impossible to stay in business. This should be obvious but it’s not always being practiced. Many new business owners focus more on the products and services rather than promoting them. This is a huge factor in causing most startups to fail in less than five years. Another issue is that many new business owners advertise through the traditional media channels in which the costs are too overwhelming. In this post, I will describe why your marketing must be direct to make it cost effective.
Before we jump in, let me state that being an accountant and income tax professional, I always get asked about tax planning and entity structure. Saving on taxes is important but is not a huge priority until you are making some money and have a steady income stream.
To begin, there is a world of difference between advertising and marketing. Marketing is not the same as spending a ton of capital to reach the masses through the traditional media channels. New entrepreneurs feel the need to “get their name out there”. The first problem with this is that traditional advertising is very expensive. The second problem is that branding your business takes time. A direct marketing approach can be much more cost effective. This is where you narrow your business to a target market. Then, your sales approach focuses on how your product/service benefits your potential customers (be sure to focus on benefits, not features).
Direct marketing could be done through attending networking events, social media, direct mail, or pay-per-click advertising. With traditional advertising, you generally pay large, flat fees. With direct marketing, you narrow your focus to only those who are in your target market. These could be people that fit a certain demographic. Or, they could type in a Google search looking for your product. By taking this type of approach, you avoid paying huge fees to appear in front of those who may never be interested in your product. In addition, there are no flat fees because the costs are directly proportional to the number of people you want to reach. For example, you can alter the number of people you send direct mail to. This makes it a variable cost. Another example is that you only pay when a potential customer clicks your online ad. You can even optimize your online ads so that you never spend over a certain dollar limit.
Finally, direct marketing is much easier to manage. You can’t manage what you can’t measure. How do you know how well a television ad is working? Certainly, you can try and ask everyone who comes in the door how they found out about your business. This is not possible in some circumstances. It’s also impossible to measure the impact on your company’s brand recognition. On the other hand, marketing online is easy to measure. You can track how many times your ad was shown versus how many people clicked on it. You can also find out what people are typing into the search engines to find your business.
By focusing on the numbers that you can measure, a few tweaks will raise your return on investment. You can spend more time and/or money on the marketing campaigns that are working and phase out those that are not performing. If you’re selling products online directly, tracking through analytics will instantly tell your whether your income is positive or not.
There are many more ways to creatively market your business to the right audience. My two rules of thumb for promoting new businesses are: keeping marketing costs as variable costs and having a way of measuring the results.